Description: We frequently are asked what to do when a company has reported aggregate estimates of tax reserves on the tax return, instead of tax reserves computed precisely according to the requirements of the Internal Revenue Code, and the IRS has challenged the reserve deduction. Other sections of this article also cover IRS rulings on the treatment and valuation of an insurance company stock purchased as an asset acquisition and COLI life insurance.

Description: One of the significant tax benefits of a life insurance contract is that, for purposes of determining the taxable amount of proceeds received under the contract on distributions or surrender,the investment in the contract includes the aggregate amount of premiums, unreduced by the cost of insurance provided IRC section 72c. IRS rules net surrender value reserves must be reduced by a YRT reserve credit.

Description: A discussion of: the value of a life insurance contract distributed from a qualified pension plan, IRS industry director directive on the DRD for life insurance separate accounts and IRS actuaries raising new issues on AG 34 tax reserves.

Description: COLI products continue to be the focus of litigation by the IRS over the deductibility of policy loan interest. This COLI Update consists of two articles concerning COLI cases and their most recent court decisions. The first concerns a District Court’s ruling on insurable interest, and the second provides an analysis of the Sixth Circuit reversal of a trial court decision in a case involving economic substance.